We’ll have to wait until mid-April for the official GDP statistics, but evidence is accumulating of a significant slowdown in China’s economy. WSJ:

The World Bank has just lowered its forecast for China in light of the deteriorating U.S. economy and now expects growth for all of 2008 to slow to 9.4%, down two full percentage points from 2007. That is, of course, extremely fast by the standards of any other economy but would still be an adjustment for China after five straight years of gains of 10% or more.

“A slowdown of growth to a single-digit rate will shock the markets, we believe, and may well trigger a retracement of prices for energy and industrial commodities,” said Carl Weinberg, chief economist for High Frequency Economics in the U.S., in a research note this week…

China’s economy could be slowing by more than official figures indicate. For instance, the benchmark measure of capital expenditure, called urban fixed-asset investment, grew 24.3% from a year earlier in the first two months of 2008. That is a very mild easing from last year’s 25.8% increase. But the headline numbers published by the National Bureau of Statistics aren’t adjusted for inflation, which has been accelerating. After accounting for those rising costs, investment grew by 18% or less early this year, compared with 23% to 25% for most of last year. Analysts blame weaker real-estate markets as well as reduced factory expansion from exporters who are seeing less demand from the U.S.

Rising raw-materials costs also are squeezing profit margins for many companies. The statistics bureau’s survey of industrial companies found total profits for the first two months of 2008 grew 16.5% from a year earlier, a marked slowdown from the 36.7% jump for the full year of 2007. Among publicly traded companies, bellwethers of both light and heavy industry are suffering.

Weiqiao Textile Co., a fabric and yarn producer with shares that trade in Hong Kong, this week reported a 20% decline in 2007 net profit. Company chairman Zhang Hongxia blamed a weaker dollar, adverse tax-policy changes in China and rising raw-materials costs. Baoshan Iron & Steel Co. also recently reported an unexpected 2.8% decline in net profit for the year. China’s biggest steelmaker has been raising prices for many products this year in an attempt to recoup higher costs for iron ore and energy.

We’ve been cataloguing the growth of China for a number of years now, and only recently have contrary signs emerged. We’ll see what the GDP numbers say later this month.

This entry was posted on Tuesday, April 1st, 2008 at 2:07 pm and is filed under China, General, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.